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Lib adviser repays $43m tax

Mark Kenny

Michael Hintze was appointed to the Abbott government’s Financial System Inquiry. Photo: Angus Mordant

A London-based billionaire appointed by Joe Hockey to advise on Australia's financial regulations runs companies that have repaid tens of millions of dollars after exploiting tax loopholes.

Australian-born hedge fund boss Michael Hintze, who is connected to the British Conservative Party, last year approved the repayment of nearly $43 million in a settlement with the UK taxman after companies in his CQS group used ''employee benefit trusts'' that ran foul of authorities.

Sir Michael, known in the British press as the ''godfather of Tory donors'', has a reported personal wealth of $1.8 billion. His financial empire, elements of which have also utilised tax havens such as the Channel Islands and the Cayman Islands, reportedly generated $154 million in 2011, but paid an apparently modest $55,000 in corporation tax.

Illustration: Matt Golding

Sir Michael is one of four international business leaders appointed by the Treasurer in March to provide additional advice to the Abbott government's Financial System Inquiry.

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He is recognised for extensive philanthropic activities, but the revelations of his company's tax affairs raise questions as to the appropriateness of engaging advisers in Australia who have been involved in tax minimisation behaviour overseas.

A spokesman for the hedge fund, Michael Rummel, categorically rejected any suggestion that Sir Michael might not be suitable, arguing that his boss' 30 years in financial markets made him ''extremely well qualified''.

Mr Rummel said Sir Michael was regularly consulted by international regulators.

The 60-year-old grew up in Australia and is one of the world's wealthier men, having this week been listed by The Sunday Times among the 1000 richest people in Britain.

The Financial System Inquiry, headed by former banker David Murray, is the first comprehensive

study of the crucial sector in 16 years. It is scheduled to report by the end of this year and is tasked with establishing ''a direction for the future of Australia's financial system''. The others on the international panel are:

■ London-based David Morgan, AO, head of private equity firm JC Flowers in Europe and Asia Pacific and a former deputy secretary of the Australian Treasury.

■ Hong Kong-based Andrew Sheng, described by the government as ''a well-known former central banker and financial regulator in Asia and a leading commentator on global finance''.

A keen supporter of the Cameron Conservative government, Sir Michael is the Tory party's principal private donor, as well as a generous private lender, having floated soft loans said to exceed $4 million.

He is also a supporter of the provocatively named Global Warming Policy Foundation whose mission is to challenge claims of anthropogenic climate change. Its website refers to the UN's Intergovernmental Panel on Climate Change as ''the climatocracy''.

Mr Hockey's office declined to comment despite being asked a series of specific questions. These included whether the Treasurer knew Sir Michael personally before the appointment, and if so what the nature of that relationship was.

His office also was asked whether the Treasurer was aware of CQS's past tax strategies in Britain leading to the multimillion-dollar settlement.

Announcing his appointment on March 24, Mr Hockey had instead praised the finance heavyweight's professional achievements. ''Sir Michael is the founder and chief executive of CQS, a global multi-strategy asset management firm … he was made a member of the Order of Australia for his support to the arts, health and education, and awarded a knighthood for philanthropic services to the arts in the United Kingdom,'' he said in a statement.

Last week, Britain's Guardian reported that Sir Michael had just donated $2.7 million to the British Conservative Party, making it the biggest single donation in six years and the largest single donor to any political party in that country currently.

''Following the 2008 HMRC [Her Majesty's Revenue and Customs] guidance relating to EBTs, CQS ceased utilising them and proactively engaged with HMRC to clarify this change to guidance. As a consequence, CQS paid £23.1 million to HMRC.''

A now estranged former business associate of Sir Michael, James Harker-Mortlock, questioned the selection of the British-Australian businessman. ''I'm just not convinced that someone who is such a known non-believer in the tax system should be engaged to advise on issues which inevitably will turn to the taxation and regulatory framework for business,'' he said.